Thursday, April 17, 2014

YOY Structural Support Now Negative


A number of people have emailed me asking for my thoughts on Belgium's recent "buying spree" in USG securities. Here is one of the emails:

"What do you make of the treasury buying out of Belgium? Seems like maybe someone isn’t yet ready for the transition? Really curious to see who it is."

I don't know who it is, but I thought I'd explain which part of the data that I like to watch. Two years ago I used the term "willy-nilly support" to contrast what was happening at that time with the "structural support" of previous decades. Here's a quote from that post:

"In fact, even though it is true that some combination of Japan, oil exporters, Caribbean banking center, Taiwan, Switzerland, Russia, Luxembourg, Belgium and Ireland (to name a few) managed to cobble together the necessary support last year, the dollar is now living off of a willy-nilly support system rather than the "structural support" it enjoyed for the last 30 or so years."

This Belgian buying smells worse than "willy-nilly support" to me. What I watch is the "structural support", defined as the storage of homeless dollars in central banks around the world. Here is FOA from 10/5/01:

"The game is to let the US economy suffer from its own bloated expansion by moving slowly away from supporting foreign dollar settlement with CB storage. This is more than enough to end the dollars timeline…"

To see this "structural support", I look at the "For. Official" line in the TIC data sheet of Major Foreign Holders of Treasury Securities from the US Treasury. "For. Official" means "Foreign Official" as opposed to foreign private holders of Treasuries. So this line shows how many homeless dollars the various central banks around the world are currently storing:


Notice that I highlighted $4069.2B for February 2014, and $4100.4B for Feb. 2013, a decrease of $31.2B over the last 12 months. If that doesn't make the hair on the back of your neck stand up, consider this:

On 1/1/14 I posted my New Year's Day post in which I observed, shockingly, that the year-over-year (YOY) increase of the past four years had dropped from a 3-year-average of +$422B to only +$24B for 2013. As shocking as that sounded on New Year's Day, we are no longer even in positive territory. Now we are negative YOY for the first time. For comparison, you can find older versions of mfh.txt here.

Here's what it looks like when we compare the previous three years with the past 12 months:

2010: +$456B (over 12 months)
2011: +$426B (over 12 months)
2012: +$386B (over 12 months)

Last 12 months: -$31.2B

At the beginning of this year, we were at about +$24B. As of the end of February, we have dipped into negative territory. This means that the rest of the world (ROW) is not only no longer "supporting foreign dollar settlement with CB storage," they are now, at least as of February, beginning to kick those homeless dollars out of the comfortable CB vaults and onto the street.

When I wrote my New Year's Day post, I estimated that the YOY for 2013 would be +$24B. It was an estimate because only the data through October was available at that time. When the actuals came in around mid-February, it turned out that my estimate was high. The actual came in at +$22.2B, compared to +$386B the previous year, and also compared to -$31.2B now.

Anyway, whoever is standing by the dollar, he smells fishy to me. My chart in the New Year's post would now look like this, with that last red dot more negative now than it was positive at the beginning of the year:


Sincerely,
FOFOA


252 comments:

«Oldest   ‹Older   201 – 252 of 252
Polly Metallic said...

http://www.afeallocatedcustody.com/research/teleconferences/download-info/apr-17-2014-interview-with-jim-rickards/

For those of you who enjoy Jim Rickards, here is a very good interview in which he discusses views from his book Death of Money. It's about 45 minutes long.

Robert said...

tEON, my advice to you is to cut the condescension, learn some humility, and learn to listen. As before, you are reacting to a stereotype in your imagination and not to what I actually said.

No, my reference to purchasing power does not mean that I am a "purchaser" rather than a "saver" or that I need to sell assets "daily" or "weekly" to buy stuff. Seriously, where do you come up with this stuff? I used the term purchasing power in the same sense that FOFOA has used the term many times before. Do I need to quote you chapter and verse? Would that even help, given your propensity to twist whatever I say? Where do you get the idea that I am frustrated and "crying the blues" because the $PoG is $990? Isn't that the opposite of what I said? Didn't I say that the frustration comes from being forced to wait to see if the theory plays out the way Another/FOA said it would? Doesn't the frustration come from what FOFOA referred to as "slow history" where we have no choice but to sit back and watch this gold market together? I have total peace of mind from the decisions I have made up to this point, and I hope you can say the same. My frustration has nothing to do with the current $PoG and everything to do with curiosity.

Please, no more messages twisting what I have said before or what I am saying now.

Can't wait to see how you twist this one.^^

tEON said...

Beejesus Robert,

This was not condescension as much as tongue-in-cheek. I know you know that. Please don't go all PC-sensitive on me. We've been rehashing this same argument since last year. IMO, our sparring boils down to a philosophical difference. I think that you feel the need to quantify and compartmentalize FG into specific investment advice complete with timing. If you feel it would be right to diversify - go right ahead. You don't need to rationalize that here - or have everyone agree with you (I'll reiterate MatrixSentry's comments "Why are trying to be convinced by someone.). And, also, convincing us is not going to improve your decision. It must be your own. If you feel discontentment with only holding physical - then hold as much as you understand! ...and we'll all do the same. I feel totally comfortable with no specific date for FG. I only need to know it is coming. I believe it is moving towards us faster rather than slower - but even that doesn't matter, that much, if I am wrong. Do I want it to happen? I suppose. I rarely think about it anymore - and by that I mean that I don't pine for it daily. Honestly, I would be extremely comfortable leaving my AU for my children. I would not be disappointed in the least. You sound as if you a have a very different attitude. I'm very comfortable with my life right now as it is. If I get a big windfall from FG - I'll probably help family/friends or give a lot away. I see Gold as insurance if TSHTF - not as some sort of lottery ticket. I don't have an inner drive to extract profit from my gold. I also don't have any desire to store my wealth in any thing else. I am not looking for a yield. That's me - I realize you are different. Timing matters to you - I get that. It doesn't to me - respect that. As I said in my last email - I wish you luck in your endeavors out there in the market. Cheers,

Robert said...

tEON, I still think that you are misrepresenting what I have tried to say. Whether it's intentional or not -- I guess it doesn't really matter anymore. We are talking past each other, and I have done all I can to try to clarify my position. I trust that most of the people reading this board grasp my point. I will not beleaguer the point further.

Lest this whole exchange be nothing more than a waste of time, I would like to come back to the current topic of the forum, which is the data on Major Foreign Holders of Treasury Securities. The current report shows current structural support as negative: a drop from 4100 in Feb 2013 to 4069 in Feb 2014. My point before was that there have been times in the past when the figures have leveled off over a 12 month period (but without actually going negative). One example is the printout from the official report dated November 16, 2011, which gives the figure at 3192 for September 2010 and 3261 for September 2011 -- an increase of only 69 that was well below the three year average. What does this mean? I am not sure it means anything except that the average increases in recent years do not necessarily translate into steady monthly increases.

nearlynapping said...
This comment has been removed by the author.
nearlynapping said...

"My suggestion is to hold as much gold as you understand and for you... that would be a very small amount."

Seems a tad condescending to me. But I don't see that much difference in the two positions. Both of you are buying gold for the same basic reason.

Timing is important to me. If I think something is 10 years away versus 2 then how I prepare changes. I used to know when FG was coming but that time has passed.

toolmaker said...

Watching the pot come to a boil can be a little hard on the nerves. I have decided that there is little one can do after all preparations have been made. So I will sit here on this bank of sand and "watch the river flow"


https://www.youtube.com/watch?v=lcWkBa-O_lg

Anonymous said...

We're all waiting for the caravan of freegold

"From the highest mountain, valley low
We'll join together with hearts of gold"

Gold Kiwi said...

I can empathise with Robert's position. I save in gold, but if Freegold comes about in the near future, I'll sell enough gold to buy my first home (not something I can afford, nor would I want to do, in the current property/debt bubble). From that perspective, it would be nice if Freegold appeared in two years rather than 20.

whatever-fits said...

I think most of us can empathize with Robert's irritation with tEON's pompous condescension. Just count the number of "I"s in his last comment. Sad to hear he has children.

Woland said...

When pot watching becomes tiresome ( which is almost always the case ) it is useful to look at the fire beneath.
In particular, just who is adding the new fuel, and in what
quantity. I suppose we could have a contest: what are the
biggest sticks being added to the fire, and when do they
arrive. I'll start with one: the May 20 Ukrainian elections.

( and if anyone of you wishes to apply for the position of
election monitor, I'll gladly pay your airfare ) smile {;<)>>

Woland said...

As the Frankenstein "monster" said to the blind violinist, who
welcomed him to his cottage; Smoke GOOD, Fire BAD.
Likewise, foreign CB support down { ;-( } but, U.S. bank
support up { ;-) } via Bloomberg;

"Treasuries Irresistible to America's Banks Awash in Cash"

"Commercial U.S. banks holdings of Treasuries rose $42
billion so far in 2014, partly due to the need to meet strengthened BIS "liquidity coverage ratio" requirements….

great job, Brownie!

Roacheforque said...

Likewise (as Woland infers) you could think of Freegold as a huge resevoir filling with storm water (pressure) against the walls of an aging dam (the current dollar system).

Eventually the increasing pressure will collapse the wall.

But we could also have a charge detonated at the weakest point of the wall to bring it down sooner.

So determining HOW the current system collapses is perhaps a precursor to being able to predict WHEN.

Some will say a "restriction of flow at the top" is the trigger, but is it really? Or is the REASON flow stops (or the reason for THAT reason) the trigger?

Or maybe one flow stops and another begins, and so there is no grand global stoppage at all, just diverting flows ...

But when history's biggest consumer/spender attempts to "lock" the worlds biggest producer out of the present $IMS it is something to stand up and take notice of. Not exactly irrelevant to Freegold I think, though little time is spent here discussing it.

And whether or not Freegold is the inevitable replacement for the current system ... that is another consideration as well.

Perhaps calculating WHO will benefit from Freegold (vs. competing mechanisms or hybridization and/or delay) is a key to understanding this as well.

Yes, time proves all.
It also changes all.

Happy Trail!
- R

Michael dV said...

napping said:
I used to know when FG was coming but that time has passed.
too true and too funny…my personal prediction is now about 20 months wrong...

Michael dV said...

pm
re Jim Rickards my conclusion is: those who know don't talk and those who talk don't know.
After reading Currency Wars it is clear he is bright but in the end he is just like all the rest. He is fighting the last war and he lacks 'a certain insight'.

Edwardo said...

If you have the time and can be bothered to read the comments of folks whose collective analysis of "Where we are and how we got here" has embedded within it a faulty premise or two, click here and you will have a veritable smorgasbord from which to choose from. It's not that all the notions being mooted about by Michael Hudson and fellow travelers are without some validity, but what, to a man, the commentators can't seem to include in the discussion is the idea that the root cause behind all the distortions they rightfully decry is the flawed nature of the monetary system itself. They are a bit like fish- if fish could think analytically and in abstract terms- who, upon realizing they are suffering an illness, never consider that the very water that passes through their gills might be contaminated.

It is not the managers of the system-who do, from time to time, demonstrate some egregious limitations- that are first and foremost responsible for our lamentable condition. For if it is primarily about that, then we are ultimately operating within a model that, for all intents and purposes, consists of the restless many being hoodwinked and defrauded by the prosperous few. Thankfully, our condition, at least in my view, is not about the bad and the powerful doing down the good and the weak but rather about a human construct-our global monetary system- that needs to be allowed the opportunity to evolve.

Indenture said...

Woland, I'll toss this on the fire.
http://www.zerohedge.com/news/2014-04-05/soaring-chinese-gold-demand-and-its-geopolitical-strategy

One Bad Adder said...

As far as tipping-points go, the $IRX is currently at it's lowest (yield) in memory and but a smidgen away from Zero.
Link: -http://stockcharts.com/h-sc/ui?s=$IRX&p=W&b=5&g=0&id=p53941350552
Makes for a VERY interesting Auction tomorrow eh?

They are doing all they can to finagle the $US down here (which is in essence unquantify-able) but the T-complex is a Horse of Another colour ie: quantify-able more or less - the short end of the curve moreso than the long.

We could be getting REAL close here fellow GoldHearts.

One Bad Adder said...

Oops! (dragging the chain a bit this week;-)
This is todays Auction result :-http://www.treasurydirect.gov/instit/annceresult/press/preanre/2014/R_20140428_2.pdf
...plumbing the depths ...and we can expect the secondary market to keep it there (or lower!) going forward.

Interest-ing times!

Edwardo said...

For your consideration.

Indenture said...

Hell, if all it took to make gold was a furnace, crucible, microwave oven and empty beer bottles Red-Necks would have mastered this technique long ago. Given enough beer and a pile of junk parts a Red-Neck can solve most problems.

M said...

Does anyone think that we will see any natural demand driven physical market tightness if nothing changes markedly in the next couple years ?

Meaning the CB of China keeps buying hundreds of tons, the public keeps on buying, the paper price stays range bound and interest rates stay the same while mining companies drop like flies ?

Physical tightness or not ? Any ? Because if gold is indeed finite, this does not make any sense on a very basic level.

Unknown said...

M, we ARE seeing physical tightness which is showing up as backwardation and the fact they haven't already dropped the price to $1000

t au said...

Edwardo
Thanks for the link to the Twilight Zone episode.

Blake said...

OBA (or anyone else)--

What is the systemic import of the discount rate hitting zero?

TIA.

One Bad Adder said...

@Blake: - (you'll probably wish you hadn't asked;-)

When $IRX and it's lesser (shorter-term) equals, are at or below Zero, TIME - which is the glue that holds the whole curve together - becomes neutered.
This process will (IMHO) cause a DE-flationary collapse where ALL longer-term Assets (Bonds, RE, $PoG etc.) are summarily discounted into the Here-n-Now.
The adages "Time-is-Money" ...and "Time-is-of-the-Essence" will be thought of in a whole new light I think.

Here's a Chart depicting the Short-Long Yield Ratio ...which, when $IRX is at Zero, the Ratio goes to Infinity ...and exquisitely depicts just such a scenario FWIW.
http://stockcharts.com/h-sc/ui?s=$TYX:$IRX&p=D&b=5&g=0&id=p58451744768

vizeet srivastava said...

I personally don't think the system can survive more than 5 years. US is no more world's most important country but still behaves like a police and a king of world economy. Coming crisis will be more akin to civil war where countries will reject US supremacy in favor of other powerful economies. No one wants to pull the plug but that anyway will happen once there is an option.
It seems Russia's Eurasian union is going to become an option. I think Russia is more acceptable to East and South-East Asian countries than Europe. I think Russia has better world view than Europe.

Michael dV said...

Eduardo
So beer bottles were also present at super nova collapse?
That guy has 'scammer' written in Sharpie across his forehead (just use your beer goggles to see it).

Michael dV said...

M
Tightness? How about a cornered market the very continuation of which is continuing ONLY through the acceptance of paper gold in lieu of physical.
We are watching as the bullion banks semi miraculously meet the demand of major producers with what skimpy supply they can get their hands on. They are doing a job on a par with Jesus doing the loaves and fishes thing. Instead of feeding a few thousand with a few loaves and a couple of fishes, the bankers are feeding the demand of an entire planet with almost nothing.
My guess is that we are seeing a combination of drastic mining supply increases as the last surviving miners scrape what they can from their richest sources. This is being paired with some sleight od hand accounting at the GLD. I suspect that maybe China (and other major producers) are buying GLD instead of the metal on the market. If China could hold the gold which backs the GLD shares in say…HSBC in Hong Kong they might be satisfied with shares for now.
If they have control over the gold and could, as large shareholders, demand metal in exchange for GLD shares, it would be the same to them as holding the metal. It would also allow GLD to show stable inventory levels even as the gold is in fact almost gone. Maybe this isn't the real story but it could be one way in which 'important entities' are kept happy. We can't have that first giant running out of the bank shouting 'they are out of gold'…can we.

Jim Okefenokee said...

Edwardo,

I suspect that this guy will finish up with more gold from his Nobel Prize for Physics medal than he will from his beer bottles. Love the Greengrocer's Apostrophe.

M said...

@ Micheal M said M, "we ARE seeing physical tightness which is showing up as backwardation and the fact they haven't already dropped the price to $1000 "

I don't mean gold backwardation, gofo rates, GLD pukes et al. I am talking about real tightness. Like actual bare shelf tightness. Where bullion dealers everywhere are unable to source inventory.

M said...

@Micheal dv

"We are watching as the bullion banks semi miraculously meet the demand of major producers with what skimpy supply they can get their hands on. They are doing a job on a par with Jesus doing the loaves and fishes thing. Instead of feeding a few thousand with a few loaves and a couple of fishes, the bankers are feeding the demand of an entire planet with almost nothing."

Nice analogy. It seems like that is what is going on here. But how can it possibly keep going at this rate for another couple years ? At some point, the gold has to run out. Just think of the volumes of gold you can still accumulate for a little over a thousand bucks cash an oz. Gold is too bulky at these prices.

Woland said...

Michael dV;

You may have inadvertently stumbled onto something:
contracts for "future delivery" of loaves and fishes? That
would explain the miracle! (the multitude would have been
satisfied)

Jeff said...

Don't count on your local dealer to tell you when supply is tight.

FOFOA: We shrimps should have gold available for purchase until some small or medium-sized Giant is denied allocated bullion. Several people asked after my last post, "What if all the APs won't play ball and redeem your basket?" My answer was, "Well, then it is game over for Bullion Banking!" Gold is going into hiding. When a small Giant runs out of one of the Bullion Bank's front door announcing "the bank is out of gold," as Fekete puts it, all offers to sell gold against irredeemable paper currency will be abruptly and simultaneously withdrawn.

Jeff said...

FOFOA: The story about the dealer is important because of the way the dealer prices his inventory. He prices it based on his restocking cost, that is, restocking in physical. He's not turning to CNBC to get the spot price and then selling to me and buying a futures contract on COMEX. He's calling another dealer whom he trusts, and who trusts him. And that other dealer is working in a similar way.

Some people think that this network of gold dealers will be the price discovery market for us shrimps in the Freegold future. The mechanism for the price discovery of various coins and sizes. And some people believe these gold dealer networks will be very important some day. This is why I described that one little incident.

Now imagine my dealer picked up the phone that day and his supplier couldn't quote him a restocking price because he wasn't getting quoted a price himself from his trusted supplier. The stock was simply not flowing.

If this happened, my dealer would not sell the gold he had in hand, because he couldn't be guaranteed a timely replacement of that stock. He'd wait until he could quote a valid price. And it is also important to understand that there are two ways a dealer gets new stock. One is from his supplier and the other is from the public.

So taking the network of dealers as a whole system, there will either be a net inflow of gold (public selling) or a net outflow (public buying more than it is selling.) And if there is a net outflow, then either the price must rise to slow the outflow in weight-denominated terms (not dollar-denominated terms though) or else the dealers network must receive an inflow from the Giants.

I have predicted that the most likely and direct collapse trigger will be when gold **IN SIZE** stops bidding for dollars. That is, when the Giants withhold from the marketplace the gold they already have. Not when they use all their dollar reserves to bid for a little more gold, but when they withhold what they already have. When infinite demand meets zero supply **IN SIZE**.

Now if you think about my "dealer network" you'll see that it is still full of gold when everything freezes up. But this gold will not move because it cannot be restocked from one of its two sources (either the public or the Giants.) It's like a water hose that's full of water yet none comes out because one end is capped and there is no flow, with a hundred thirsty mouths gaping and waiting at the other end.

Gold will go into hiding, because there will be no known price to coax physical to restock the dealer network out of either the strong hands like you and me, or the Giants who stopped bidding for dollars with their gold.

So as I hope you can see, there is not going to simply be a smooth widening of the spread between paper and physical. At some point it will snap (break) and physical will stop moving altogether. The paper price will fall at this point because it will have failed to deliver. And while you correctly imagine that this visible widening could possibly be concurrent with the onset of systemic collapse, I think you fail in assuming the direction of causality.

You seem to be assuming that the difference between the prices will be the cause of the event, but it is only a visible effect, not the cause. The cause is the collapse of faith in the dollar's ability to deliver, and the withdrawal of bids for dollars from the physical gold giants.

Edwardo said...

I'm glad some of you liked the beer bottles into gold vid. I thought having the offspring of Strother Martin ( though without the marvelous vocal tone ) as narrator was choice.

DP said...

Strother Martin?

You mean it WASN'T the Mogambo Guru?

Roacheforque said...

Vizeet,
I think you are correct. The Eurasian Union could take at least 5 years to develop a competing system that has enough trade, gold and energy flow (it's own circulating economic ecosystem) to make the dollar less relevant, or even more or less "useless" in that bloc. Meanwhile, the dollar loses more support.

Europe? The question here is whether or not the position they take today is fully predicted and an expected move for this situation, and the role the Euro *might* play.

In the end, who truly benefits from freegold, and when do those benefits outweigh the disadvantages, such that those who would continue to fortify the "dollar levee" (and have the means to do so) finally walk away and let the flood of freegold bust through?
www.roacheforque.blogspot.com

Unknown said...

@Robert, I hear you. The responses to your questions are kind of bizarre, though some certainly thoughtful. I think the answer that seems to be sent back in so many different ways and words is we're never going to really see because we're shrimps and that's that. We will be the last to see the real tightness, just as the quote above alludes to.

But generally to your questions, I say keep asking. Everyone is learning, even FOFOA. It is impossible to properly predict how billions or at least hundreds of millions of people will handle a currency change from a major global power.

To presume so because someone writing a blog has some thoughts based on someone else's deep musings is absurd. Of course we want signs of when things may change. The insistence that thinking for such is like Catholic Priests yelling at you for questioning God. His presence is everywhere, just open your eyes! This isn't a religion, it's economics.

Also, here's a question. What if someone creates a new energy alternative tomorrow that structurally reduced oil demand globally? Or, what if the US began using less and less oil while producing more and more? How much further could this delay the dollar shift?

(The US now consumes about a million or more barrels a day less than the late 90s and produces ~2.5 million barrels per day more. For daily consumption of just under 19 million, a 3.5 million swing is material, equal to ~$125 billion relative). Or, since no one likes "fiat", that's 3,056 metric tonnes a year.

Edwardo said...

The Mogambo Guru? Hmm, my impeccable source, see Jim Willie's "The Voice", says son of SM and MG share the same biological father. Furthermore, both are distant relations to President Taft and Spike Milligan. Pardon my failure to (adequately) communicate.

Robert said...

Andrew, if we are shrimps and we will be the last to see real tightness, should we stop looking for it?

Bron Suchecki had a post over on his blog in January where he said that there is no premium for 400oz bars. He said he would report when and if that situation ever changes. Meanwhile, he suggested one thing to keep an eye on would be the spreads between bid an ask at Bullion Vault because they only deal in 400oz bars. Somebody should let the giants know that the Perth Mint is will to sell 400oz bars in quantity to anyone who wants to pay a premium.^^

The Screwtape bar study shows that a lot of the bars that leave the GLD trust eventually come back, meaning that the bars stay in London. So much for the theory that all the gold in GLD has been sent off to China. We can only speculate the reasons for the redemptions. And I think it is important to remember that the volumes in the trust increased when confidence in the world monetary system was falling after the 2008 crisis.

I do not expect the onset of FG in the foreseeable future. I am prepared for it if it happens, but I do not expect it to happen. If I am wrong, great, I will be happy to be wrong. But I do not think so. Control fraud and inertia can keep this system going for a long long time.

I expect another major systemic shock, or possibly an outright war, before we see FG.

S P said...

Anybody else out there getting depressed? Any words of encouragement?

I know that I'm not the crazy one, and that this can't go on, but yet it does. I don't want suffering, but I do want natural events to take shape. I'm tired of the entitlement and decadence around me.

Nobody believes in consequences anymore, everybody seems filled with illogical and contradictory thoughts in their head. And everyone believes they are a superhero! Overworked denizens of a bankrupt empire think they are gods!

nearlynapping said...

Are we approaching "peak frustration?"

vizeet srivastava said...

Andrew Storm,
I think Solar revolution is underway, in India we are seeing massive Solar plants getting build. If Indian government start taking Thorium seriously we have world's biggest thorium reserves. I think South Asian and African countries are going to move to solar power soon.

M said...

@ Jeff

"
I have predicted that the most likely and direct collapse trigger will be when gold **IN SIZE** stops bidding for dollars."

Doesn't the data we get about the imports by the CB of China represent some buying in size ?

Giants and shrimps are buying the physical. At what point does a bunch of shrimps start to equal a giant ? This does not have to be that complicated. If people are buying physical for the paper price, then eventually, physical supplies will be exhausted. And something has to break.

The solution is higher prices

vizeet srivastava said...

I think even though we see huge demand of gold from China, I am quite sure China will not allow its demand to crash the system. It will impose import restrictions or increase duty. China economy is too dependent on US, economy crash will trigger great depression kind of situation there. That is another reason why I think HI in US will happen before paper/physical delink. HI in Japan could be the trigger.
Time of event is quite unpredictable at this time so preparation is the key.
Recent progress on Russia shows that Russia does not see China as reliable partner. And it makes sense because Russia is trying to become most important economy replacing China, US and Europe.

ein anderer said...

@Robert:

Those who go "all in" are looking for more than just protecting their current purchasing power. They are looking to make a killing on a revaluation, and they are making a gamble.

The question is: What do you mean with »all in«?
If »all« is everything what you own, then »all in« is not good. You need some cash for the months, may be years (hopefully not decades) ahead.

If »all« means all what you can save easily w/o further thinking about it, why not? Diversification is [looking up the dictionary] reciprocally proportional to your understanding of the Freegold lense.

There is nothing bad in it if one does not understand Freegold fully. For those there is a very simple rule (thanks to FOFOA):

Take 10’000 whose buying power should be protected.
Assuming Freegold is right, may be not (level of undertanding).

So how to act?

Simple! For the case Freegold is right you should be prepared. Freegold = 50x revaluation (highest probability, right). So take out of your 10’000 savings 1/50, put it in Gold, and there you go. These 200 bucks would be enough to protect your wealth in case Freegold happens. (We’ve learned: Freegold is directly combined with US$-hyperinflation = USD-nihilation, right?)

If Freegold would not happen, you have not lost anything. These 5g of gold tend to stay 5g of gold, right?

On the other side: If your understanding is growing, your confidence that Freegold stands in front of the door will be growing. And therefore you would buy some more of the shiny.

After all it is a theory, a lens by which FOFOA is looking at realitiy (like his famous predecessor and friend). For most of the people who understand this theory
very well the confidence ist very high: This theory/lens is doing a marvelous job for understanding reality. And they react accordingly.

Others have not so much confidence (Freegolders would say: because they haven’t RRTFB), and they react accordingly.

The ones buy more gold, the others less.

That’s the whole story of preserving one’s buying power IMO! »Buy as much as you understand!« :)

My 2cent only.

Michael Martin said...

For those at "peak frustration", another way of preparing for the arrival of FG is to practice dancing; you get to exercise, release endorphins, burn fat and get fit.

And the dance would also be appropriate when FG does arrive/manifest:
http://www.youtube.com/watch?v=JQS1m65WUCI

Ken_C said...

Michael Martin

How about this dance
http://www.youtube.com/watch?v=jXuZetmoHhw

nearlynapping said...

Phil's dance wins. The old man looks like a half crazed FG disciple finally proven right!!

Ken_C said...

The dance is from the movie The Treasure of the Sierra Madre after they discover the gold deposit.

Polly Metallic said...

They often show that clip on CNBC when they discuss gold mines and the price of gold.

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